“The investor’s chief problem – and even his worst enemy – is likely to be himself.”
— Benjamin Graham
The Sensex has reached the 18,000 level once again.
(A) Many investors who invested in 2007, when markets were trading at similar levels, are unhappy. Most of them are waiting to exit the markets once they can sell at cost. Their reasoning is simple — they believe they could have earned better returns through bank fixed deposits over the past three years.
(B) Many investors who entered the markets in 2009 are extremely excited, as most of their investments have nearly doubled. A large number of these investors have developed a short-term outlook. They believe they now fully understand the markets and can repeatedly generate high returns. Many of them want to exit at current levels and plan to re-enter only if the Sensex falls back to 12,000. They consider themselves market experts.
Greed and fear operate in both directions of the market.
Investors falling into either of the above categories often fail to recognise a fundamental rule of nature that applies equally to financial markets:
“This too shall pass.”
My view is that investors in either of these categories are unlikely to achieve long-term success over an investment lifecycle of 3, 5, or 10 years. This is because their exit and entry decisions are driven purely by recent market returns, rather than by progress toward long-term life goals. Such behaviour leans more toward speculation than disciplined investing.
Do you find yourself fitting into any of the categories mentioned above?
Disclaimer
This content is provided for educational and informational purposes only and should not be construed as investment advice, research, or a recommendation to buy or sell any securities.
Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully.
